The industrial production indices for January and February show a decrease in the production of the whole wood industry compared to the corresponding months of the previous year. Figures from the National Institute of Statistics show a sharp decline in production.

The slowdown is significant – about 5% in the primary wood processing industry and 12% in the furniture industry.

The data provided by the National Institute of Statistics is worrying. Most likely, the decline in industrial production amplified in March, and will continue to decline in the coming months, if no measure is taken to eliminate the artificial shortage of resources in the short term. Public policies must be adapted to the realities on the ground, through real, fast, and efficient consultative mechanisms, in order to support this vital sector of the national Romanian economy.

Cătălin Tobescu

President, Asociația Industriei Lemnului - Prolemn

How did this decline come about? Prolemn presents an exclusive analysis below

The artificial reduction of the wood resource in the market has led to prices in Romania that are not related to the evolutions on the international markets and blockages in the supply of resources to the wood industry.

A review of developments in international markets – with a focus on the softwood segment, which has much higher shares in international markets – highlights a gap between Romania and international markets, which is felt in the industrial production.

Factors currently influencing international developments:

  • The gradual disappearance of surplus roundwood from the market caused by the gradations of bark beetles in Central Europe.
  • Blockades of timber imports from Russia, Ukraine and Belarus, given the current war.
  • Supply outages in the US market.
  • Increased transportation and insurance costs related to the Black Sea.
  • Decline of the construction activity, caused by declining purchasing power, soaring prices for construction materials, and rising interest rates.
  • Increased use of biomass for energy in the context of the oil and gas supply crisis.

How do these factors influence the evolution of prices in the main markets?

Aside from large fluctuations in the US market, which is rapidly returning to baseline levels and may fall to very low levels in the coming months (as was the case last year), international timber markets have not fluctuated dramatically in recent months.

The amplitude of variations in log prices is much smaller.

In the German market, which is the highest in terms of prices in Europe, prices are barely approaching the 2015 price level, before the bark beetle gradations’ appearance.

Therefore the softwood logs prices on the forest road, in Germany, are of maximum 110 Euro/ m3. The median prices for timber are 320-340 USD/m3. In North Africa, prices are lower, mid-level in China and slightly higher in the Gulf countries, but with higher quality specifications.

Paradoxically, in Romania, the prices are 700 lei / m3 for standing timber, 900 lei / m3 for sawn logs and 1,400 lei/m3 for softwood timber. 

For softwoods, sawn logs prices are around 180 Euro/m3, 60% higher than in Germany!

Although the price of logs in Romania is so high, the export prices for Romanian timber are mainly the prices of the Arab markets: 320 USD/m3 in Constanța port, as a median price.

Some of the major causes that led to the artificial shortage of resources in Romanian market:

  • Implementation of the SUMAL 2.0 system on February 1, 2021, with temporary blockages induced by functionality issues and long-term systemic effects. Procedures for the development of timber on small properties and in forest vegetation outside the national forest fund have been streamlined.
  • Imports were hampered by the obligation to issue notices registered in SUMAL 2.0 for transhipment from shipping to road or rail, with the measurement of the entire volume piece by piece, an operation impossible to organize logistics in ports.
  • Regulations have emerged on the environmental assessment of forest management – by amending the Forestry Code – and orders on the revision of the environmental assessment of forest management. These generated long-term blockages of the application of forestry arrangements and implicitly affected the timber resource placed on the market.
  • Reduction of the volume of wood sold by RNP-Romsilva, as a result of the transition strategy to cut wood. The supply of standing timber has been reduced by almost half and there have been delays in contracting harvesting services. The effect was a shortage of wood on the timber market.

Meaningful measures to support the sector:

  1. Measures with immediate, short-term impact:

– Approval of an annual quota for timber harvesting by the Board of Directors of RNP – Romsilva at the level of the possibility established by the forest management plans, of 11-13 million cubic meters, according to the provisions of the Regulation for the capitalization of timber.

– The immediate offering on the market, on stump, of the timber resource scheduled to be placed on the market as shaped wood, under the conditions of the procedures for contracting operating services without being awarded.

  1. Medium-term measures:

– Starting again the public debate the draft amendment to GD 497/2020 for the approval of the Rules on the origin, movement, and marketing of timber, so as to comply with the principles of EUTR 995/2010:

– Economic activity should not be hampered by excessive administrative burdens.

– Traceability should be pursued mainly at the first placing of timber on the market, with a focus on control of risk areas and activities.

– To encourage voluntary compliance, by implementing own due diligence systems of economic operators. The SUMAL 2.0 system must be a basis for supporting the economic operators’ own systems.

– To have separate norms for the own consumption of the small owners, according to the provisions of the Forestry Code.

– Amending Ministerial Orders 1946 and 1947/2021 on environmental assessment and revision of the environmental assessment of forest management, so that the procedure is smooth and does not lead to blockages in the application of forest management, affecting the timber resource available in the market.

  1. Long-term measures:

– Developing a national forestry strategy and pursuing its implementation, with the aim of capitalizing on the potential of the forest-timber sector to simultaneously support economic growth based on renewable bio-resources and pursuing environmental objectives, following the principles of cascading timber resources and objectives to maximize the substitution effect of wood products and biomass used as an energy source for other products with a much higher environmental footprint.

– Implementation of a timber capitalization system that prioritizes access to resources for economic operators that add the most economic, social and environmental value to the timber resource, in proportion to the consumption of timber from the previous year – see Polish model.